Question: A small tourist town has two Italian restaurants Romano s and

A small tourist town has two Italian restaurants, Romano’s and Giardino’s. Normally both restaurants prosper with no advertising. Romano’s could take some of Giardino’s customers by running radio ads and Giardino’s could do the same thing. The one- month profit matrix (showing payoffs in thousands of dollars) is:

a. What is the Nash equilibrium in the static (one-month) game?
b. If the game is repeated indefinitely, can the use of tit-for-tat strategies result in a Nash equilibrium?
c. Does the game have multiple equilibria if it is repeated indefinitely?
d. Would pre-play communication (Chapter) or the Pareto criterion (Chapter) have implications for the repeated gameequilibrium?

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  • CreatedNovember 13, 2014
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